In 2009MARS Inc. has been faced with new challenges in their buying process of their diesel engine due to changes with their Columbus supplier. The D-342 diesel engine market is in jeopardy which is why the supplier dropped production and left MARS Inc. with only one option in suppliers. Having to now deal with only one supplier Tom Sosa, the purchasing manager, has had to figure out what this change means to MARS Inc. in terms of transportation cost, inventory and storage costs, and continue the enforcement of MARS INC.’s implementation of lean manufacturing.

Case Study Questions

What were MARS total costs per year prior to the new price structure when the diesel engine price was $4,800? Was Mars’s using the EOQ method?

With the volume purchase discounts and warehouse constraints, what is the best ordering quantity?

With the change in supplier and the resulting addition of volume purchase discounts and different transportation rates, how are costs and EOQs affected?

What is the difference between all-unit quantity discount and incremental discount schedules? How would the costs and EOQs differ? Which would be preferable assuming that both share the same cost figures?

How will these changes impact the Lean Manufacturing Philosophy at MARS? What would be the resulting changes in inventory levels?